What is GST- 5 Disadvantages of GST you need to know

GST stands for “Goods and Services Tax”. GST would replace all the indirect taxes which are levied on the goods and service by the Government. These indirect taxes are from Central Government and state Government. On 3, August, 2016 the most awaited GST bill passed in the Rajya Sabha. Passing of Goods and Services Tax bill was the biggest reform in the Indian economy. It was the most important economic reform by PM Modi Government. The basic idea of launching this reform is to create single, cooperative and undivided Indian market, which in return would strong the Indian economy.

In short it a one indirect tax which would be applicable throughout the country. It is a comprehensive indirect tax which would be levy on manufacture, sale and consumption of goods and services at the national level. With this doing business across the country would become very simple and there would not be any price difference in product. But all of us know that very thing which is coming with some advantages, must be having some disadvantages too. Now Money Dial will explain those disadvantages.

5 Disadvantages of GST Bill:

Tobacco and alcohol Products are outside the scope of GST:

In any state Revenue from the sale of alcohol/beverage is the big source of tax collection. In the recently passed Goods and Services Tax bill they have not included the alcohol/beverages products. It means that now the states would own the power to increase the tax on alcohol/beverage consumption as per their requirement. However, tobacco products are there in Goods and Services Tax, but it would be chargeable at 40%. Apart from this charge central exercise on the cigarette would remain to continue.

Timely delivery of IT backbone for GST:

According to Finance Ministry, IT backbone of Goods and Services Tax would be rolled out by 1 April 2017. The ideas of launching the IT backbone is to put an eagle eye on tax payment made by individual or company. Now with this bill, there would be a unique taxation throughout the country and it would be easy to administer it. But to do administration job finance ministry would be requiring strong IT backbone. There is a doubt that whether IT backbone would be working or not working or will it is efficient as per the desire.

The reason behind this doubt is that every person or company who register themselves under Goods and Services Tax would get a GST identification number. GST number is a 15 digit number, which would be of state code and pan card. To get the GST number the businessman has to approach GST portal and do registration by PAN card and mobile number. Getting registration of every businessman under GST card is very doubtful through the newly developed IT backbone.

Entertainment tax under GST:

In the GST entertainment tax is still there. Which mean that if you are planning to watch the movie at any multi-complex like PVR or INOX. The ticket price would not be reduced. In the present time there is a 27% entertainment tax on the movie ticket in various states. This 27% entertainment tax is also applicable on food and beverage which you take it from the theatre.

Real Estate will go down:

Due to GST, the purchasing cost of new homes will increase by 8%. Which in return would reduce the demand for real estate by 12%? In the present time as all of us know that real estate sector is not performing very well. With this change, the condition of real estate would be more adverse.

GST is Consumption-Based Tax:

From the GST bill, it comes to know that it is a destination-based tax. So the state where the consumption of any goods and services is more would be getting better revenue. The state where the consumption of any goods and services is less would be getting less revenue. In this ways implementation o,f this bill it will create co-operation issue with various states of India.

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1 Comment

It depends on the tax structure and the type of goods a common man use/consume. As per the latest proposed GST tax structure , most the essential commodities will have either zero or 5% tax slab rate. But let’s wait for few more months to have complete idea on this!